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Archive for May, 2015

The U.S. EPA on Friday released new numbers for its Renewable Fuel Standard Renewable Volume Obligations, surprising some with increases across the renewable fuels spectrum, but disappointing others for inability to meet Congressional mandates.

For 2014, EPA proposed levels that were actually produced and used as transportation and jet fuel or heating oil in the U.S.

For 2015, EPA is proposing 16.30 billion gallons of total renewable fuels; for 2016 that total moves up to 17.40 billion gallons. That’s an increase from proposed 2014 levels that were released in November, 2013, which amounted to 15.21 billion gallons. EPA said in its announcement that increases were “ambitious” but don’t meet volumes originally set by Congress.

“Due to constraints in the fuel market to accommodate increasing volumes of ethanol, along with limits on the availability of non-ethanol renewable fuels, the volume targets specified by Congress in the Clean Air Act for 2014, 2015 and 2016 cannot be achieved,” the announcement said.

EPA said though the volumes were lower than Congress asked for, they are “above historical levels and would ensure continued growth in advanced biofuels.”

Once the proposal is published in the Federal Register, it will be open for public comment until July 27, 2015. A public hearing also will be held June 25 in Kansas City, Kan.

EPA said it would “take action” on the proposal by Nov. 30, 2015. That timeline would mark a return to original RVO release deadlines. The agency was required earlier this year by consent decree to release proposed volumes; it previously had missed several deadlines, drawing criticism from renewables groups that this sluggishness was stifling investment in the industry.

“Today’s proposals are better than EPA’s initial proposed rule for 2014, but they still need significant improvement,” he said. “We have sincere concerns that these proposed numbers are not moving forward to the degree that Congress had intended for the RFS.”

Buis said the only way RFS goals can be reached is by introducing higher blends. “The initial read on EPA’s proposal is they have simply acquiesced to the demands of Big Oil,” Buis said.

The National Corn Growers Association also was concerned with the proposal’s approach at gradual increases. The group’s president, Chip Bowling, said the EPA’s approach cuts 3.75 billion gallons from the original mandate between 2014 and 2016.

“This represents nearly a billion and a half bushels in lost corn demand. The only beneficiary of the EPA’s decision is Big Oil, which has continuously sought to undermine the development of clean, renewable fuels,” he said.

He also didn’t rule out legal action. “We are evaluating our legal options for defending the law and protecting the rights of farmers and consumers. We will fight to protect and build profitable demand for corn, which is of fundamental interest to NCGA and our farmers.”

Meanwhile, the American Soybean Association acknowledged the proposal’s increase over previously proposed levels, but said it does not properly capitalize or recognize the growth potential of biodiesel.

“The administration wants to address climate change and reduce greenhouse gas emissions and biodiesel – a domestically produced, renewable fuel that is proven to achieve emissions reductions up to 86 percent better than petroleum diesel – can contribute more to that effort,” ASA President Wade Cowan said.

That sentiment of increasing biodiesel use was shared by the National Biodiesel Board, but it was generally more positive about the RFS proposal, calling it a “significant step in the right direction.”

“It is not perfect, but it will get the U.S. biodiesel industry growing again,” said NBB CEO Joe Jobe. Total U.S. biodiesel consumption fell to 1.75 billion gallons for 2014, according to EPA, down slightly from nearly 1.8 billion gallons in 2013.

NBB earlier this year said stagnant RFS action had something to do with those lower levels, but Jobe said the numbers in the most recent RFS proposal can help get the industry and jobs going again.

“Biodiesel has proven that Advanced Biofuels can do just what we said they would, which is create jobs and strengthen our energy security while significantly cutting harmful pollution from petroleum,” Jobe said, but “more can be done, and we particularly look forward to working with the administration on strengthening biodiesel volumes for 2016 and 2017.”

With a lot of the early corn nearing the V3 stage and the weather getting warmer, it is time to keep an eye out for armyworm and cutworm. Indiana and Kentucky are both reporting near record high numbers of moths migrating from the south. Both of these insects are migratory and growers need to start scouting their fields.

Keep a closer eye on fields that have a lot of ground cover or weed presence. If your fields have chickweed the probability of cutworms showing up increase dramatically as well. Black cutworms infested fields can start to show injury when the corn just starts to emerge. With the cooler weather you will probably start to see the moths this weekend and next week. Female cutworms like to lay the eggs in fields with heavy weed cover. As we kill these weeds by either tillage or herbicide, the larvae will travel to the emerged corn. Cutworms cut the crop at ground level or just below ground level, which is also below the growing point of corn. If you have history of cutworms in your fields you are more likely to have cutworms again this year.

Armyworm moths travel very similar to cutworm moths by using the jet stream to travel large distances in a short period of time. Armyworms lay their eggs in grasses, including wheat, where the eggs will hatch over a 2 week period. Once the eggs hatch the larvae will start to defoliate plants and lead to a loss in yield. Armyworms will also damage corn that is planted into wheat fields or fields that have a grass cover. If an infestation occurs you can have a significant stand loss which may lead to rescue treatment or replanting.

There are ways to stop these insects from affecting your fields. Planting certain corn varieties that include either the Cry1F trait or the Viptera trait. If you do find either of the insects in your fields a rescue treatment is more effective than the preventive treatments.

Talk with your local Mercer Landmark Agronomist today creating a program to help minimize damage to your fields.

Do you have your coin ready? As the trade begins to feel more and more comfortable that we have been successful at planting our crops this year and that they have gotten off to a good start, we should be quickly transitioning into a summer weather market. That means, flip a coin as to what that outcome may hold and hence the market activity. Heads; weather problems, tails; continued good growing conditions. Certainly there will be market noise and activity generated by other factors such as the direction of the dollar, a surprise sale or cancellation, quarterly grain stocks reports, etc., but as a whole traders will pay particular attention to shifts in the weather. In fairness, there is more to weather prediction and market analysis than flipping coins but for those 60 to 90 days between June and August it seem little else matters. Keep in perspective though, in a global market we need to view weather globally as well.

This morning at least, it did not feel much like great growing weather as it was 45 degrees or less in areas, when I stepped out of the house but the sub-normal temperatures should be behind us by tomorrow and market concerns of frost in the Dakotas seem a distant memory. Rain continues to fall across the western and central Plains and moisture hampers field work to the south but with a prediction of warming temperatures I suspect bulls will find little footing with that outlook.

The dollar was stronger again overnight and this appears to have been a focus in the grain trade this week but the strength does appear to have faded now as we reached into the morning hours. The strength in dollar appears to have been stimulated by a sentiment that the US economy could be gaining momentum, which is somewhat debatable, but probably motivated even more so by the ongoing saga in Greece. This has once again raised the entire debate as to if Greece will be booted from the EU and that kind of uncertainty pushes traders to the relative security of the U.S. dollar.

There seems to be little else to drive prices this morning. Export sales tomorrow morning but these should be routine as the US faces stiff competition for all commodities right now. I do not believe the 120k MT of beans announced to China yesterday will be in the figures. For now, we keep a watchful eye on changes in the weather and keep those coins handy.

At the beginning of this week, “wheat was kind of a ho-hum thing because there wasn’t any good news or bad news” for the crop in last Tuesday’s USDA numbers.

Since then, wheat of course took off and went up–strongly—on news that there might be some wheat that got killed in the frost” and that more of the crop might be at risk. Saturday morning North of Minot, North Dakota it was 29 degrees. That doesn’t bode well. … Wheat has nine lives, but the market certainly got concerned.

With all that being said, the upward momentum in July wheat continues to build from the early May bullish divergence that had formed off the contract low. Short covering forced the market to a one month high of $5.19. Resistance above the market is at $5.25 and then the April high of $5.42. The former $5.01 resistance has now became support which incidentally is the 40 day moving average. Secondary support is at $4.71 and then the May low of $4.60.

Wheat is between Feekes 9 and 10. Septoria is present as well as powdery mildew in some fields. It is important to keep in mind that Powdery mildew thrives under cooler tempratures and high relative humidity, which we could see later this week. There are a few aphids present, and it is important to be diligently scouting for armyworm this year, as reports of high moth counts are coming in throughout Indiana.

Alfalfa:

I have had several customers already spray their alfalfa fields for weevils this year. The chart below will help in determining whether a treatment is necessary. The fields that have been sprayed had several weevil per stem ranging in size. With smaller weevil present, and no intentions of harvesting alfalfa in the next 5 days a treatment is strongly recommended.

Corn:

Corn emergence is looking really good throughout the growing area. I have not seen any seedling diseases yet, however that could quickly change as the cooler temperatures move in this week paired with saturated soils in some areas. Below is a trial we will be following throughout the growing season with Ascend PGR on popcorn in Van Wert, OH. Ascend is a mixture of cytokinin, gibberellic, and indolebutyric acid used in-furrow. It can be mixed with 10-34-0 and zinc, however in this case it is mixed with water and Serenade Soil, a biological fungicide from Bayer that prevents against seedling diseases. Ascend accelerates leaf, stem and root growth. So far we are really excited with the results we are seeing.

Continue to follow Mercer Landmark’s Blogging by the Bushel for additional updates on our Ascend trial, as well as other trials we are conducting throughout the area. Lastly, if you are not finished planting corn, and interested in doing a trial on your own farm, talk with your local Mercer Landmark Agronomist today!

Scouting your alfalfa early and often is key to the overall health and longevity of your alfalfa stand. Scouting for alfalfa weevil early on and then potato leaf hopper later in the season will help you get the most out of your alfalfa. We found a few diseases early on this spring and a lot of alfalfa weevil feeding. Below is a picture of what we have been finding in some alfalfa fields. Below that is a picture of what an alfalfa weevil looks like.

After speaking with one of our dairy specialists, he came to the conclusion that this was black stem rot and common leaf spot. These two diseases occur most often in thick stands that are in a warm wet atmosphere where air cannot get below the canopy. We also have seen a lot of leaves on the ground when walking fields as shown in the picture below. Leaves on the ground are wasted tons left in the field.

A way to avoid diseases like these and insect feeding on your plants is to scout early and often and spray early. A good rule of thumb is to spray 8-10 days after each cutting with an insecticide. While you are going across the field you can add micronutrients that alfalfa loves, such as boron. This disease could have been somewhat prevented if sprayed early on with a fungicide. For scouting tips on alfalfa contact your local Mercer Landmark sales professional.

As many people have the corn planted and are just starting on soybeans, I get asked how long it should take for the corn to emerge. Corn requires 100-120 GDUs from planting to emergence and 140 GDUs for soybeans. To figure the GDUs take the Daily High Temp ( 50 degrees or above but not to exceed 86 degree) + Daily Low Temp ( if temp goes below 50 then use 50) Take the sum and divide by 2. Then take this number and subtract 50 from it.

[(DHT + DLT) / 2] – 50 = Daily GDU

I am also getting questions on the large size of soybean seed this year. The seed is larger this year as a result of high yields in production fields and rains during August. Be sure and check with your implement dealer to check on what settings you need. Also be sure and use adequate amounts of graphite or a flowability agent. Mercer does have a flowability agent From Bayer that is less dusty and safer for the bees. See your local Mercer Landmark representative for more information.

With the 5-year commodity super-cycle apparently over, producers will need to adjust their marketing plans in the following ways:

Know your cost of production.

Be realistic. The sooner you adjust to the lower price levels, the better.

Be pro-active. In the past, the market has given us multiple opportunities to lock in profits. Those opportunities may become fewer and farther between now. Have a plan in place, which includes open offers, flat price contracts, min/max/averaging contracts, and hedge-to-arrive (HTA) contracts.

Focus on the basics. One such basic, which will be discussed below, is capturing the carry.

EXAMPLE OF CAPTURING THE CARRY
A producer that would like to get $4.00 for corn that will be put into the bin this fall can achieve this goal, even if the cash price never gets to $4.00. Let’s assume a farmer sells December 2015 futures at $3.95 (which we had several chances to do last month). He then puts an offer in to “capture the carry” between December futures and March futures when the spread gets to 14 cents. He now has a $4.09 March hedge. If the basis is attractive for Jan/Feb/March delivery, he can lock in the basis, or he can roll the $4.09 March hedge to a $4.16 May hedge or a $4.23 July hedge. Thus, the producer can now deliver corn for over $4.00 cash, even if the price never gets to $4.00 next spring.

Look at the table below, showing the December 2015/ March 2016 corn spread

Takeaways from this table:

The December/March corn spread has traded 13 cents (or wider) each of the past 5 years.

In short crop years, the spread tends to narrow in throughout the year.

In big crop years, the spread tends to widen out throughout the year.

With a comfortable 2014 corn carry-out and an adequate 2015 corn acreage number, the odds are good that the 2015 December/2016 March corn spread will continue the streak of trading at least out to 13 cents sometime this year. Assuming a normal yield this year, the spread should also continue to widen out throughout the course of the year.

As wheat flowering will soon be upon us, it is time to be considering the possibility of Fusarium Head Blight (FHB), or scab.

The fungus that causes FHB infects wheat during early flowering, at Feekes Growth Stage 10.5.1. Symptoms that appear later include bleached head spikelets and shriveled or small grain kernels.

Photo courtesy of University of Kentucky Photo courtesy of University of Illinois Photo courtesy of Ohio State University

Moist, warm and humid conditions contribute to FHB infection.

Penn State University has developed a model that utilizes pertinent weather information such as rainfall, humidity and temperature to calculate risk of FHB. This model has been updated for 2015, and now includes a feature to estimate risk based on susceptibility by wheat variety. The model can be found at the following link: http://www.wheatscab.psu.edu/ .

Wheat growers can also enroll in alert notifications via cell phone or email from the U.S. wheat and Barley Scab Initiative. Sign up for alerts by visiting this link: http://scabusa.org/fhb_alert.php .

For growers wishing to be proactive about control of FHB, certain fungicide applications can be made at early flowering for suppression or control of scab. Prosaro® (Bayer CropScience) or Caramba® (BASF) has been found to be effective on scab control when applied at early flowering (timing is critical). Fungicides that have a strobulurin mode of action are not labeled for head scab suppression.

Contact your local Mercer Landmark agronomy specialist to schedule your wheat for fungus control and to aid in proper timing application.

Just one day after posting new contract lows, July 15 wheat was able to put together a nice recovery effort on Wednesday. For the first time in four days, the market finished a session posting both a higher high and a higher low. This could signal the recent downward trend may be changing. However, despite the rally, prices still couldn’t manage to break the contracts major chart formation – a nearly month-long descending trend channel.

Tough resistance sits at the top of the recent trend channel and the March and Mid-April lows near $4.84 ½. If the upward momentum can carry the market through the trend-channel top, look for stiff resistance at the combination of the contract’s long-term trend line and 50-day moving average, which both sit just above 500. Support comes in at the recently pegged contract lows, with further support at the bottom of the trend channel near $4.50.

The wheat market remains vulnerable to short covering and momentum rallies as the Fund position remains a record short and the market still sits in deeply oversold territory. Wednesday was a good example of what can happen when too many traders get to one side of the boat. Some rocking is inevitable. With that said, the fundamentals and technicals still point the wheat market lower. It will be interesting to see what, if any, follow-through momentum Thursday can do to push more shorts off what is now a very crowded boat.